Final Results
5 November 2010
PipeHawk plc
("PipeHawk" or the "Company")
Final results for the year ended 30 June 2010
Chairman's Statement
The recession has proven deeper and longer than envisaged last year and these
results reflect a full year of this recession. Nevertheless the Group has
survived intact and, I believe, is well positioned with the right people and the
right offerings to move back into profitability.
I can report the turnover for the year ended 30 June 2010 was £2,636,000 (2009:
£3,241,000) which is a decrease of 19 per cent on the previous year. The Company
incurred a loss after taxation for the year of £844,000 (2009: loss £398,000).
Adien
Adien operates in the large infrastructure project part of the construction
industry. Â During 2009 Adien suffered from the withdrawal of funding for
projects that it had been awarded. Â In addition, as was the case five years ago,
the water companies delayed the appointment of their framework partners for the
next phase of Asset Management Plans ("AMP") and which has delayed Adien's
participation in the detailed design and planning process that precedes these
capital projects. Â Adien has aligned its overhead base to match the sales
activity being experienced in the market better. Â The first quarter of 2010
brought an upturn in the level of enquiries and orders but as has been reported
nationally the construction industry had a disappointing second quarter in 2010
which was reflected at Adien. Â Currently Adien is pursuing vigorously all
opportunities offered by the market place and is also marketing the e-Spott
layer re-instatement equipment as both a service offering and a capital
equipment sale opportunity.
Technology Division
In the period under review PipeHawk continued to develop new GPR products and as
a consequence has capitalised approximately £382,000 of research and development
expenditure. I can report a good level of interest in our e-Spott product, which
allows spot testing to be conducted on road and layered surfaces. Â We have made
good progress with the e-Safe product, a mini "customer friendly" e-Spade -
cable avoidance product. Â The e-Safe product has attracted interest from
international distributors, which gives us confidence that sales volumes in the
short to medium term could be higher than that achieved for any other PipeHawk
product.
QM Systems
At QM Systems ("QMS"), the turnaround of this company is taking longer than our
management team anticipated. Â The team have been working hard to expand the
service offering and customer base. The past 12 months have seen the company
move from being almost entirely reliant on projects to establishing consultancy
services and product based business units. In addition, the project business has
been expanded to include mechanical engineering capability making QMS a true
turnkey provider of solutions. These activities are key in bringing greater
stability and ultimately profit back to QMS.
QMS has a large volume of quotations which are awaiting decisions from
customers. Â Many of these are to existing customers and it is also encouraging
to note that a number of repeat orders have already been received from customers
for whom QMS completed projects last year.  QM's commitment to research and
development of products to support high integrity environments has been
maintained throughout the period.
SUMO
Like Adien, SUMO has suffered somewhat in the period under review. Â This is in
line with other construction-based industries in the current economic climate.
SUMO's management have taken the necessary steps to restore its profitability in
2010.
Turnover for the year ended 30 June 2010 was £2,959,000 (2009: £4,382,000) and
its operating loss for that period was £236,000 (2009: £71,000 loss).  Sumo is
accounted for in the group financial statements as a joint venture. The turnover
of SUMO has not been accounted for in the group financial statements given it is
a joint venture.
Related party transactions
In the period under review, as in previous years, I undertook to provide working
capital to the Company. During the year ended 30 June 2010 I advanced loans to
the Company of £1,125,000, in aggregate. In addition, since 30 June 2010 I have
advanced further loans of £535,000 to the Company.
In March 2010, the Company's bankers gave the Company notice that it intended to
withdraw all the facilities that it had made available to the Company. Â The
Directors sought to obtain replacement facilities from other banks but were
unsuccessful. Â I am confident regarding the long term future of the PipeHawk
group and therefore I agreed to advance further funds to the Company on similar
terms to the loans I had previously advanced to the Company on the understanding
that negotiations would commence on converting £1 million of loans into
convertible unsecured loan stock.
Accordingly, on 13 August 2010 the Company issued £1 million of Convertible
Unsecured Loan Stock 2014 ("CULS") to me to replace some of the loans I have
previously made amounting to £1 million.  Further details can be found at note
7 below..
My letter of support dated 12 November 2009 was renewed on 2 November 2010 for a
further year. Loans other than those covered by the CULS agreement are unsecured
and accrue interest at an annual rate of base rate plus 2.15 per cent.
The directors, other than myself, consider, having consulted with the Company's
nominated adviser, that the terms of the loans are fair and reasonable insofar
as the Company's shareholders are concerned.
In addition to the loans I have provided to the Company during the period and in
previous years, my fellow directors and I have deferred a certain proportion of
our fees until the Company is in a suitably strong position to make the full
payments.  These deferred fees amount to approximately £106,000 in the year
ended 30 June 2010 and approximately £489,000 in total, all of which have been
accrued in the Company's accounts.
Strategy & Outlook
The PipeHawk group is geared towards creating sustainable earnings-based growth
and focuses on the expansion of its business with forward-looking products and
services. PipeHawk acts responsibly towards its shareholders, business partners,
employees, society and the environment - in each of its business areas.
 PipeHawk is committed to technologies and products that unite the goals of
customer value and sustainable development. Â After a difficult year my outlook
for the group remains optimistic.
Gordon Watt
Chairman
FURTHER ENQUIRIES
 PipeHawk Plc 01420 590 990
Gordon Watt (Chairman)
 Merchant Securities Limited  020 7628 2200
David Worlidge
Simon Clements
Consolidated Statement of Comprehensive Income for the year ended 30 June 2010
 30 June 30 June
2010 2009
Note £'000 £'000
Revenue  2,636 3,241
----------------
Staff costs  (1,626) (1,841)
Operating costs  (1,876) (1,900)
----------------
Operating loss  (866) (500)
Share of post tax loss in joint venture  (70) (17)
----------------
Loss before interest and taxation  (936) (517)
Finance costs  (79) (87)
----------------
Loss before taxation  (1,015) (604)
Taxation 2 171 206
----------------
Loss for the year attributable to equity holders of the
Company  (844) (398)
Other comprehensive income  - -
----------------
Total comprehensive income for the year net of tax  (844) (398)
Loss per share (pence) - Â basic and diluted 3 (2.85) (1.48)
Consolidated Statement of Financial Position at 30 June 2010
  30 June 30 June
 Note 2010 2009
Assets  £'000 £'000
Non-current assets
Property, plant and equipment  107 143
Goodwill  1,061 1,061
Intangible assets  1,803 1,426
Investment in joint venture 4 65 135
--------------------
  3,036 2,765
--------------------
Current assets
Inventories  179 299
Current tax assets  156 156
Trade and other receivables  493 674
Cash and cash equivalents  90 -
--------------------
  918 1,129
--------------------
Total assets 3,954 3,894
Equity and liabilities
Equity
Share capital  330 269
Share premium  5,151 4,842
Other reserves  (5,795) (4,951)
--------------------
  (314) 160
--------------------
Non-current liabilities
Borrowings 5 512 517
--------------------
  512 517
--------------------
Current liabilities
Trade and other payables 6 1,743 1,836
Borrowings 7 2,013 908
Bank overdrafts  - 473
--------------------
  3,756 3,217
--------------------
Total equity and liabilities  3,954 3,894
Consolidated Statement of Cash Flow for the year ended 30 June 2010
  30 June 30 June
 2010 2009
Note £'000 £'000
Cash flows from operating activities
Loss from operations  (866) (500)
Adjustments for:
Depreciation  74 104
Impairment of intangibles  5 34
Profit on sale of fixed assets  - (23)
----------------
  (787) (385)
Decrease/(Increase) in inventories  120 (31)
Decrease in receivables  175 68
(Decrease)/Increase in liabilities  (93) 332
----------------
Cash used in operations 8 (585) (16)
Interest paid  (79) (87)
Corporation tax received  177 156
----------------
Net cash (used in)/from operating activities  (487) 53
----------------
Cash flows from investing activities
Development costs paid  (382) (435)
Purchase of plant and equipment  (41) (58)
Sale of plant and equipment  3 65
----------------
Net cash used in investing activities  (420) (428)
----------------
Cash flows from financing activities
Share issues  370 -
New loans and finance leases  1,139 521
Repayment of bank loan  (10) (209)
Repayment of finance leases  (29) (47)
----------------
Net cash generated from in financing activities  1,470 265
----------------
Net increase/(decrease) in cash and cash equivalents  563 (110)
Cash and cash equivalents at beginning of year  (473) (363)
----------------
Cash and cash equivalents at end of year  90 (473)
Statement of Changes in Equity for the year ended 30 June 2010
  Share   Share
 Share premium Retained Other options
Consolidated capital account earnings reserves reserve Total
 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 July 269 4,842 (4,951) - - 160
2009
Loss for the - - (844) - - (844)
period
Share issue 61 309 - - - 370
----------------------------------------------------------------
 330 5,151 (5,795) - - (314)
----------------------------------------------------------------
Total
comprehensive
income
Total - - (5,795) - - (5,795)
comprehensive
income
----------------------------------------------------------------
As at 30 June - - (5,795) - - (5,795)
2010
----------------------------------------------------------------
As at 1 July 269 4,842 (4,553) - - 558
2008
Loss for the - - (398) - - (398)
period
----------------------------------------------------------------
 269 4,842 (4,951) - - 160
----------------------------------------------------------------
Total
comprehensive
income
Total - - (4,951) - - (4,951)
comprehensive
income
----------------------------------------------------------------
As at 30 June - - (4,951) - - (4,951)
2009
----------------------------------------------------------------
Notes to the Final Results for the year end 30 June 2010
1. Â Â Â Â Basis of preparation
The financial statements have been prepared in accordance with international
financial reporting standards as adopted by the EU and under the historical cost
convention.
The financial information set out above does not constitute the Company's
statutory accounts for one year ended 30 June 2009 and 2010, but is derived from
those accounts. Statutory accounts for 2009 have been delivered to the Registrar
of Companies and those for 2010 will be delivered following the Company's Annual
General Meeting. The Auditors have reported on those accounts; their reports
were unqualified and did not contain any statements under Companies Act 2006
section 498 (2) or (3).
2.    Taxation
 2010 2009
 £'000 £'000
United Kingdom Corporation Tax
Current taxation (150) (178)
Adjustments in respect of prior years (21) (28)
----------------
 (171) (206)
Deferred taxation - -
----------------
Tax on loss (171) (206)
Current tax reconciliation 2010 2009
 £'000 £'000
Taxable loss for the year (1,015) (604)
------------------
Theoretical tax at UK corporation tax rate 28% (2009: 28.0%) (284) (169)
Effects of:
- R&D tax credit adjustments 24 10
- other expenditure that is not tax deductible 3 3
- adjustments in respect of prior years 21 (28)
- accelerated capital allowances (116) (115)
- losses carried forward 131 58
- short term timing differences 50 35
------------------
Total income tax expense (171) (206)
The Group has tax losses amounting to approximately £860,000 (2009: £1,069,000),
available for carry forward to set off against future trading profits.
3.    Loss per Share
This has been calculated on a loss of £844,000 (2009: loss £398,000) and the
number of shares used was 29,443,591 (2009: 26,937,181) being the weighted
average number of share in issue during the year.
4.    Investment in Joint Venture
 Investment in shares
 £'000
Cost:
At 1 July 2009 & 30 June 2010 198
-----------------------
Share of losses
At 1 July 2009 (63)
Share of losses for the year (70)
-----------------------
At 30 June 2010 (133)
-----------------------
Net investment
At 30 June 2010 65
At 30 June 2009 135
 Investment in shares
 £'000
Cost:
At 1 July 2008 & 30 June 2009 198
-----------------------
Share of losses
At 1 July 2008 (46)
Share of losses for the year (17)
-----------------------
At 30 June 2009 (63)
-----------------------
Net investment
At 30 June 2009 135
At 30 June 2008 152
The investment in joint venture relates to a 30.3% shareholding in the ordinary
share capital of SUMO Limited. SUMO Limited is engaged in the development of a
GPR franchise operation and has a year end of 31 December. Â For the purpose of
preparing this consolidation, financial information has been prepared for the
year ended 30 June 2010. Â SUMO Limited's principal place of business is Havant,
Hampshire.
Summarised financial information in respect of the Group's joint venture is set
out below:
 30/06/10 30/06/09
£'000 £'000
Total assets   2,356 2,350
Total liabilities   2,139 1,906
Net assets 217 444
Group's share of net assets of joint 65 135
venture
 Year ended 30/6/10 Year ended 30/6/09
Total revenue 2,959 4,382
Total profit for the period    (233) (56)
Group's share of profits of joint venture (70) (17)
5. Non-current liabilities: Borrowings
 2010 2009
  £'000 £'000
Borrowings (note 7) 512 517
6.    Current liabilities: Trade and other payables
  2010 2009
  £'000 £'000
Trade payables 506 662
Other taxation and social security 278 452
Payments received on account 86 23
Accruals 873 699
Amounts due to group undertakings - -
----------------
 1,743 1,836
Included within the above amounts are the following amounts owing to directors;
 2010 2009
G G Watt £689,181 £579,586
R G Tallentire £200,779 £161,139
R J Chignell £15,000 £15,000
R R MacDonnell £19,000 £19,000
The directors have undertaken not to call upon these amounts until the Group is
in a position to generate sufficient operating cashflows
7.    Borrowing Analysis
 2010 2009
  £'000 £'000
 Due within one year
Bank loans 7 12
Directors' loans 1,991 867
Obligations under finance lease agreements 15 29
----------------
 2,013 908
 Due after more than one year
 Bank loans - 5
 Obligations under finance lease agreements 12 12
 Directors' loans 500 500
----------------
 512 517
----------------
 Repayable
 Due within 1 year 2,013 908
 Over 1 year but less than 2 years 512 516
 Over 2 years but less than 5 years - 1
----------------
 2,525 1,425
Bank loans include loans from the Bank of Scotland £7,220 (2009: £16,847).
The loan with Bank of Scotland is at a rate of 14.1% and is repayable in monthly
instalments, the final instalment being in April 2011. Â The loan is secured over
various plant and equipment.
Finance lease agreements with Barclays Asset Finance Limited and Banque PSA
Finance are at a rate of 4.5% over base rate. Â The future minimum lease payments
under finance lease agreements at the year end date was £22,333 (2009 £41,056)
The director's loan from G G Watt of £500,000 falls due for repayment in
December 2010 and is to be further extended until December 2011. Â This loan has
been included above as due within one year. Â Directors' loans attract interest
at 2.15% over Bank of England base rate.
On 13th August 2010 the Company issued £1 million of Convertible Unsecured Loan
Stock 2014 ("CULS") to G G Watt, the Chairman of the Company. Â The CULS have
been issued to replace loans made by G G Watt to the Company amounting to £1
million.
The principal terms of the CULS are as follows:
 -The CULS may be converted at the option of Gordon Watt at a price of 7p per
share at any time prior to 11 August 2014;
 -Interest is payable at a rate of 10 per cent per annum on the principal amount
outstanding until converted, prepaid or repaid, calculated and compounded on
each anniversary of the issue of the CULS. Â On conversion of any CULS, any
unpaid interest shall be paid within 20 days of such conversion;
 -The CULS are repayable, together with accrued interest on 11 August 2014 ("the
Repayment Date");
* The Company has the option, after 1 year to repay the CULS before the
Repayment Date, subject to the Company providing 10 days' notice.
8.    Net Cash Inflow from Operating Activities
 2010 2009
 £'000 £'000
Operating loss (866) (500)
Amortisation of intangible assets 5 34
Depreciation of property, plant and equipment 74 104
Profit on sale of fixed assets - (23)
Working capital movements
Inventories 120 (31)
Receivables 175 68
Payables (93) 332
----------------
Net cash inflow from operating activities (585) (16)
----------------
9.    Dividends
The directors do not recommend the payment of a dividend (2009: Nil).
10.    Copies of the Report and Accounts
Copies of the Report and Accounts will be posted to shareholders shortly, and
will be available from the Company's registered office, Manor Park Industrial
Estate, Wyndham Street, Aldershot, Hampshire GU12 4NZ and from the Company's
website www.pipehawk.com.
[HUG#1459239]
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Pipehawk PLC via Thomson Reuters ONE
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